The Role of Preferential Trade Agreements (PTAs) in Facilitating Global Production Networks

Abstract

This article examines the effects of over 250 preferential trade agreements (PTAs) on trade flows distinguished into parts and components (PCs) and final goods in production networks for the period of 1979-2008. The gravity equation estimates suggest that the concurrent year effects of PTA formation on trade in PCs are not seen, while they have the positive impact on trade in final goods. Rather, it is found that PTAs have positive and perversive effects on both types of trade flows in six and nine years after the PTA formation.